Michael Dell extols the benefits of going private, a year after Dell-EMC mega merger

SAN FRANCISCO — It's been a year since Dell consumed EMC in the biggest tech merger ever, and Michael Dell was in a celebratory mood.

The world's largest privately-controlled technology company on Thursday reported the fruits of its labors: fiscal second-quarter revenue of $19.3 billion, up 48% from a year ago, and thousands of new small- and mid-sized business customers. It also posted a $1 billion operating loss from non-cash expenses associated with "purchase of assets" — namely, Dell's move to go private in 2012 and its acquisition of EMC.

“One of the beauties of being the controlling shareholder in a company, is you can do whatever you want to do.”

Michael Dell

Behind a rallying cry of "Go big, win big," the merging of seven companies that formed today's Dell Technologies — which employs 138,000 people — fulfilled Dell's vision of hurtling his namesake company into an age of Internet of Things, cloud computing, artificial intelligence and other cutting-edge technologies.

"We're innovating like a start-up with the scale and reach of a global technology powerhouse," Dell told USA TODAY in a phone interview, citing two byproducts of the $67 billion deal.

The billionaire, who started his PC business from his dorm room at the University of Texas at Austin, isn't done shopping: The behemoth continues to snap up companies such as Apteligent, which helps mobile app makers measure performance, and ManyWho, a cloud development platform.

"As Dell likes to say, he is looking for Picassos in the basement," says Matt Eastwood, an analyst at market researcher IDC.

It's also investing $4.5 billion in research and development annually. (Apple's R&D budget, by comparison, was $10.4 billion last year, its its most ever.)

An essential deal

The Dell-EMC merger fit a blueprint established by Dell. He took his company private in a $25 billion deal in October 2013 after a bruising, year-long battle with activist investor Carl Icahn. The showdown was essential to the survival of the company, Dell insisted, after it embarked on a shape-shifting mission to diversify into data centers, cloud computing, servers, software, services, security and system management.

What followed was a reinvention of the company that made its name — and fortune — selling personal computers in a world increasingly beholden to smartphones and tablets. It was a challenge Dell relished after feeling handcuffed by the expectations on a public company undergoing a significant makeover.

"One of the beauties of being the controlling shareholder in a company, is you can do whatever you want to do," Dell said.

To be sure, tech mega-mergers are treacherous endeavors. Consider HP-Autonomy, Microsoft-Nokia and other big deals that backfired, leading to massive write-offs and layoffs.

Early returns on the deal are generally good.

Analyst Eastwood says Dell Technologies has succeeded in three of its four major businesses: storage, servers, PCs, and infrastructure software.

The relative weak link, storage, was addressed at the VMworld trade conference last week, when Dell inked deals with Amazon and Google, Eastwood says.

An IDC survey of consumers (99%) and Dell customers (95%) concluded positive to neutral reaction to the deal. "The takeaway was that (it) was a private company that is consistent and unlikely to do anything crazy because of investor pressure," Eastwood says.

David Vellante, chief analyst at Wikibon, a tech researcher in Marlborough, Mass., says the clear winner in the deal is VMware, the virtualization software that has been "unleashed" under Dell to expand into cloud computing.

Plenty on his mind

During a far-ranging, 30-minute interview Dell touched on several topics:

— Manufacturing jobs in the U.S. President Trump has trumpeted the need for manufacturing jobs to return to America's heartland, a desire heeded by Foxconn with a forthcoming billion-dollar facility in Wisconsin.

"There is a lot to be done to create the right (business) incentives to create more factory environments," says Dell, a member of Trump's manufacturing council that disbanded last month. "Hopefully, we'll see more announcements."

Dell runs storage and solutions manufacturing operations in Franklin, Mass., and Apex, N.C. It also operates a third-party facility with FedEx in Lebanon, Tenn., where there is final assembly on desktop PCs, notebooks, servers, storage and racks.

— The tech job gap nationwide. The Trump Administration's focus may be on jobs, jobs and more jobs, but hundreds of thousands of tech unfilled jobs is clearly a concern for Dell. (CompTIA, which offers retraining programs for military veterans, the unemployed and under-employed adults, projects a shortage of 1.8 million workers by 2024.)

"There is a significant skills gap," says Dell, ticking off occupations in data analytics, security and software code writing. "The amount of data being created in the world now is staggering with the (spread) of smart connected nodes. AR, VR, IoT, and cloud will integrate humans and machines more than ever before, across all facets of life."

"Data is the fuel for this rocket," Dell said, alluding to Dell Technologies.